The high court's decision sets the stage for whether encumbered and unencumbered shares in the Singhs' hospital group Fortis Healthcare could be sold.

ET Online

January 31, 2018, 14:48 IST

Updated: January 31, 2018, 14:56 IST

The Delhi High Court has allowed the enforcement of the Rs 3,500-crore arbitration award that Daiichi Sankyo won against billionaire Singh brothers for hiding information while selling erstwhile Ranbaxy Laboratories to the Japanese drugmaker in 2008.

Daiichi and the Singhs have been locked in litigation since 2016 over whether the firm can enforce its award in India. The counsel for the brothers earlier told the high court that “substantive objections” existed under India’s arbitration law to make the award unenforceable here.

In 2013, the Japanese drug maker had taken the Singhs to an arbitration tribunal in Singapore after pleading guilty to felony charges related to Ranbaxy making and distributing adulterated medicines in the US and falsifying data. The firm eventually had to reach a $500-million settlement with the US Department of Justice earlier that year over these allegations.

Daiichi alleged that the brothers had concealed information regarding wrongdoing at Ranbaxy when selling the firm to it for $4.6 billion in 2008. The Singapore tribunal ruled in the Japanese firm’s favour in April 2016, directing the Singhs to pay over Rs2,500 crore as damages.

Including interest and legal fees, the award was valued at Rs 3,500 crore.

The high court's decision sets the stage for whether encumbered and unencumbered shares in the Singhs' hospital group Fortis Healthcare could be sold.

Since January 2017, Daiichi had made several attempts to block the brothers from closing a deal to sell their controlling stake in Fortis. The firm argued that such a sale would dilute the value of the assets it seeks to recover as part of its award.

The high court in June 2017 gave the Singhs a green light to enter into corporate transactions if they maintained the value of unencumbered assets that could be used to pay the award if Daiichi won its case to enforce it.

Following this, Daiichi moved the Supreme Court, which has since directed two companies controlled by the Singhs to maintain their encumbered and unencumbered shareholding in Fortis. This also effectively blocked lenders from selling shares in Fortis pledged to them to recover the money they were owed by the Singhs.

Daiichi is also currently trying to stop another of the Singhs' entities, Religare Enterprises Ltd, from using Rs500 crore from the sale of its health insurance business to repay a loan taken out by its capital markets subsidiary in Mauritius. The high court is expected to hear arguments in this matter on February 13, 2018.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.